The keynote session at Benefits Canada’s 2024 Defined Contribution Investment Forum warned that the failure to plan for the ‘boomer bulge’ is affecting private and public pension policy.
The presentation from Paul Kershaw, a policy professor at the University of British Columbia and founder of not-for-profit organization Generation Squeeze, got me thinking: if the influx of boomer retirees is a bulge, what terms will be used to describe the future shifts of younger demographics who are facing a much more complex economical imbalance?
The ‘bulge’ in question is the very large baby boomer generation, born between 1946 and 1964, which makes up a significant portion of the population. As this generation moves through the age pyramid, it’s drawing attention to several challenges, including the increased pressure on younger generations to support the ageing population.
With the Canada Pension Plan enhancements that were phased in between 2019 and 2023, the current workforce is now contributing an additional one per cent (5.95 per cent versus 4.95 per cent) for the rest of their working lives. While I support the change in principle, I feel it also highlights an imbalance. Contributions from younger generations aim to ensure a sustainable CPP for the long term, but the older generations will benefit the most — drawing down their CPP at the higher rate now while also paying the lower rate during their working years.
This generational imbalance is reflected in other parts of the economy. Consider the housing market. In Kershaw’s presentation, he compared 1976 with today in terms of earnings for Canadians aged 25 and 34 and the price to buy a home. While the average annual salaries were relatively close ($55,000 today versus $58,000 in 1976), the average house price had nearly tripled ($247,000 in 1976 versus $704,000 today).
“For people who bought homes in the 1970s and 1980s as a nurse or a bus driver, their asset has increased so much in value that they’re no longer that blue collar worker, they’re part of the global one per cent,” said Kershaw. “By contrast, a younger person with a good education making good earnings by today’s standards may very well struggle to find a two-bedroom apartment they can afford to rent.”
Another area to consider is the evolution of work. Gig and other types of temporary employment is on the rise, whether as a full-time job or as a supplemental way to bring in some extra money during the current cost-of-living crisis. Considering the escalating cost of everything and the expansion of precarious work, how are younger generations expected to save for retirement, let alone get into the housing market?
This month’s Cover Story, which appears alongside the annual CAP Suppliers Report, digs into the retirement dilemma. “The inherently unpredictable nature of gig work compounds this challenge — irregular income streams make it difficult to commit to consistent retirement contributions or engage in meaningful long-term financial planning,” says Paul Glavin, associate professor of sociology at McMaster University.
In the article, experts also highlight that employers are favouring more flexible savings options focused on other financial goals, which should hopefully benefit gig workers, as well as broader younger generations. It’s a shift in savings priorities that the boomer generation didn’t have to consider.
Returning to the boomers, Hydro Ottawa is focusing on its retiree population with a strategy that aims to mitigate the subsequent impact on its workforce and organizational memory. In the Employer Strategy, Donna Burnett Vachon, the organization’s director of change and organization development, describes Prime Time, a program that allows employees to phase into retirement by returning to temporarily work with the company in some capacity.
While this type of program clearly engages retirees as they enter an unfamiliar phase of their lives, it also allows them to pass the institutional knowledge they’ve amassed through their career on to the next generations.
Ultimately, I think the Hydro Ottawa program signals an important point as the boomer bulge enters their retirement years:I know it can be very easy to focus on the imbalance between generations — and it remains an important consideration for anyone involved in public policy and workplace strategies — but if we focus on taking the wisdom of older generations and applying it to the challenges ahead for younger employees, I think it has the potential to be a win-win for everyone.
Jennifer Paterson is the editor of Benefits Canada and the Canadian Investment Review.